Wholesale Drug Distributor Charged $100 Million Fraud Scheme

The owner of a Utah-based wholesale distribution company has been charged with fraudulently distributing to pharmacies more than $100 million worth of prescription drugs that he bought from a “nationwide black market,” potentially endangering thousands of unsuspecting patients. This was revealed in an indictment unsealed last month in New York. Randy Crowell, a Nevada resident, was charged with one count of conspiracy to commit health care fraud, one count of conspiracy to commit mail or wire fraud, one count of conspiracy to violate the Food, Drug and Cosmetics Act and one count of conspiracy to commit money laundering, the U.S. Department of Justice (DOJ) said. He faces a maximum of 55 years in prison.

The scheme was profitable for Crowell, who earned about $16 million alone from reselling black market prescription drugs. But what he was doing was dangerous to patients who took the medication not knowing that the medicine had been previously prescribed to others before being resold and trafficked, often in unsafe conditions, according to the DOJ. Manhattan U.S. Attorney Preet Bharara said in a statement:

Crowell perverted the system designed to ensure patients receive safe and effective medication, making millions in the process. Crowell’s alleged crime victimized not only benefit programs like Medicaid, but also countless everyday people suffering from illnesses who had no idea their medicine had been diverted from the legitimate stream of commerce and could be dangerous to consume.

From early 2010, when Crowell established his business, to at least July 2012, he ran a licensed wholesale distributor based in southwest Utah and bought drugs at a fraction of their original price before selling them as new to pharmacies all over the country, according to the DOJ. To maximize profits, the DOJ said, Crowell and his co-conspirators focused on some of the most expensive medications, including those used to treat HIV and AIDS.

Rather than buying medication from manufacturers or legitimate authorized distributors at full price, participants in the scheme targeted the cheapest possible source of supply – Medicaid patients and other folks who received monthly prescriptions for little or no cost and who were willing to sell them rather than take them. These people sold their medications to so-called “collectors” who worked on street corners and in stores and paid as little as $40 to $50 in cash for each bottle, according to the DOJ.

Because the goal was to resell the previously prescribed drugs as new at full price, the conspirators used hazardous chemicals, such as lighter fluid, to remove the labels. This process was dangerous since the chemical could get into the bottles and render the drugs unfit for human consumption.

The collectors then sold the secondhand drugs to people who then sold them to those with direct access to legitimate distribution channels, including corrupt wholesale companies like Crowell’s business, the DOJ said. These wholesalers then sold them as new to pharmacies, which could be the very same locations that initially dispensed them at full price.

Crowell’s company had no legitimate sources of supply, the DOJ said, and, consistent with its illegitimate origins, inbound shipments of drugs often arrived improperly packaged in unsealed, unsecure cardboard boxes. The bottles were sometimes already opened, or contained what appeared to be the wrong medication, the indictment said, noting that employees attempted to remove any bottles that still had patient labels or were otherwise visibly damaged or used.

To maintain a facade of legitimacy, the company lied about the drugs’ origins by creating false documents that purported to show the legitimate movement of the medication, the DOJ said. Crowell himself took numerous steps to conceal his activities, including using the alias “Roger,” frequently changing the phones he used to communicate with co-conspirators and paying them through sham companies, the indictment said. The activities described in the indictment are more than shocking. It’s almost impossible to conceive such a dastardly plot. Hopefully, there will be a deterrent effect from this prosecution.